Elena M Katsulos
Reverse mortgage consultant NMLS #305525
Reverse Mortgage for Purchase
Most people don’t know this, but a reverse mortgage can be used to “purchase” a new home. This means that you can buy a new home with a reverse mortgage, and not have to worry about making monthly mortgage loan payments as long as you live in the home. However, you must still pay your property taxes, home insurance, and any association dues.
1. How do I use a reverse mortgage to purchase a new home?
The reverse mortgage for purchase allows older adults, age 62 or older, to use a reverse mortgage loan to purchase a new principal residence, and have no monthly loan payments as long as the borrowers are living in the home as their primary residence. Borrowers are responsible to pay property taxes, home insurance, and association dues if applicable.
2. What are the down payment requirements?
The required down payment is the difference between the purchase price and the amount of funds available from the reverse mortgage.
3. Must the borrower occupy the property?
Yes. The reverse mortgage for purchase program is only available for owner occupied properties, and the borrower must occupy the property within 60 days after closing.
4. When is a reverse mortgage for purchase typically used?
• Borrowers cannot qualify for a traditional mortgage
• Can qualify for more home than with traditional mortgage
• Empty-nesters downsizing in retirement
• Relocation to be near family, friends, or warm weather
• Need single story home for physical needs
• Need home with other senior friendly attributes such as widened doorways, safe bathrooms, ramps, limited stairs, etc.
5. What property types are eligible?
Properties that are eligible for purchase with a reverse mortgage include:
• Existing Single Family residences
• FHA approved condominium
• Manufactured homes*
• New Construction properties where the Certificate of Occupancy or equivalent has been issued BEFORE taking the application, ordering services, etc.
*Some restrictions apply.
6. Must the borrowers pay property taxes and insurance?
Yes. Under the terms of the loan, the borrowers are responsible to pay property taxes, home insurance, association dues, or any other property obligations that may become a lien on the property. Like any traditional mortgage, failure to do so may result in foreclosure.
Continued Next Week
Reverse Mortgage for Purchase – Scenarios